GIFT City’s future hangs in balance

The group has a total debt of about Rs 91,000 crore and the National Company Law Appellate Tribunal (NCLAT) ha... Read More

AHMEDABAD: The fate of Rs 70,000-crore Gujarat International Finance Tec-City (GIFT City) hangs in balance as the new board of Infrastructure Leasing and Finance Services (IL&FS) recently admitted that many of the IL&FS group companies involved in the project, including the joint venture partner – holding company IL&FS — will not be able to pay off their debt to their financial creditors.

GIFT City Co Ltd, which is implementing the GIFT City project in Gandhinagar, is a 50:50 joint venture between IL&FS and state government-owned Gujarat Urban Development Co. Ltd.

The project houses the country’s first International Financial Services Centre (IFSC). Of the 880 acres of land over which GIFT City project has been envisaged, about 250 acres is earmarked for IFSC.

The central government, on October 2, 2018, superseded the board of debt-ridden IL&FS by appointing a new six-member board chaired by Kotak Mahindra Bank MD, Uday Kotak. The government’s decision was based on a report received from the regional director, Mumbai, ministry of corporate affairs. It concluded that the affairs of IL&FS holding company and its group companies were being conducted in a manner prejudicial to public interest.

The group has a total debt of about Rs 91,000 crore and the National Company Law Appellate Tribunal (NCLAT) had proposed a moratorium of 90 days on loans taken by IL&FS and its 348 subsidiaries in October.

On February 11, the tribunal directed 22 Indian subsidiaries of IL&FS to service their debt obligations according to the schedule. NCLAT also lifted the debt moratorium on 133 foreign group entities of IL&FS to enable them to continue the resolution process.

NCLAT, however, marked 38 companies in ‘red’. These domestic group entities cannot meet their payment obligations towards even senior secured financial creditors, as and when such payment obligations become due, according to the NCLAT order.

The ‘red’ list includes companies like IL&FS, IL&FS Financial Services Ltd, Sabarmati Capital One, Sabarmati Capital Two and IL&FS Township and Urban Assets Ltd, IL&FS Transportation Networks Ltd. All of these are subsidiaries of IL&FS and are involved in GIFT City project, shows GIFT City Co’s annual report 2017-18. The total indebtedness of GIFT City Co was about Rs 1,250 crore, according to the report.

“Sabarmati Capital One and Sabarmati Capital Two have built the first two towers where many companies have leased spaces. We were one of the first few companies to open our operations at GIFT City and we are now worried about the project’s future,” said a company executive working at one of the companies in GIFT City.

A final order by NCLAT on the ‘red’ list is expected on March 12.

GIFT City Co was incorporated on June 21, 2007 with both IL&FS and GUDC contributing Rs 32.50 crore each in the equal joint venture. The state government has allotted land of 662 acres at a nominal price of Re 1/sq metre to GIFT City Co and GIFT SEZ with the condition that the entire development of infrastructure in GIFT City will be done by the company out of the proceeds of the development rights sold to private developers.

GIFT City Co has invested close to Rs 2,000 crore in developing necessary infrastructure and more than 150 financial and other companies have set up their operations at GIFT City.

Set up on the banks of the Sabarmati river, near Gandhinagar, the project has been pitted to rival IFSCs of Singapore, Dubai and Hong Kong.

A senior official at GIFT City Co said that Gujarat government is already working on the process for picking up IL&FS’ equity stake in GIFT City Co. However, with the matter being in NCLAT, the government will have to present a resolution plan to the appellate tribunal for the proposed take-over, said another government official.

Some contractors have also approached National Company Law Tribunal, Mumbai bench, over non-payment of dues by some of the IL&FS subsidiaries involved in GIFT City project.

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